November 30, 2018

Market News

Stocks are little changed to begin Friday’s exchange as investors patiently await trade/tariff color stemming from the G-20 summit meeting in Buenos Aires. US President Donald Trump and Chinese President Xi Jinping are slated to meet over dinner on Saturday to try and hash out grievances surrounding trade. The S&P500 is currently trading at 2,739.17, 0.05% higher.

Treasuries are moving higher in the AM as investor attention turns towards the G-20 summit in Argentina. Earlier today, the U.S. Mexico Canada Agreement (USMCA) was signed, alleviating some jitters and anxiety on the street. On top of this, the Federal Reserve Minutes corresponding to the November meeting were released yesterday, and expressed a more cautious, wait-and-see (data) approach to interest rate hikes in 2019. Additionally, the US 2/10 Yr spread is hovering near an YTD low at 19 bps. The US 10-YR Note is currently trading at 3.0078%, 0.0219 lower.

MBS Performance and Volumes

MBS lagged intermediate Treasuries on Thursday, giving up most of Wednesday’s stellar performance. 30-year Fannies lagged their 10-year hedge ratios by 4-5 ticks, while Ginnie performance exhibited an up-in-coupon bias—GNII 3.5s underperformed 10s by 4/32s while GNII 4.5s and 5s trailed 10s by 2 and 1 tick, respectively. 15-year Fannies had a less dramatic performance, but nonetheless lagged the 5-year by 1-3 ticks. Trading activity continued to pick up, with $200 billion in total reported trades, including just under $10 billion in spec pools.

TBA MBS’ are little changed in the early morning shuffle as investors digest the latest developments stemming from the G-20 summit meeting and rhetoric from the US Central Bank. This week, FNCL/G2SF 4.5’s have gained 8+ and 10+ tics as markets bet against the propensity of three rate hikes in 2019. Liquid coupons are currently trading at 0+ – 1 tic higher.

The USD is moving higher in the AM, bolstered by a weaker-than-expected inflationary reading stemming from the eurozone. The EUR and GBP are sharply lower against the USD. The DXY is currently trading at 97.13, 0.36% higher.

Oil is falling hard to begin Friday’s exchange as supply fears continue to sit at the forefront of investor attention. WTI is currently trading at 50.17, 2.49% lower.